Objective, impartial advice for Property Investors and Landlords with a focus on the Edinburgh area

Tuesday, 13 December 2016

41% of Edinburgh Tenants’ Salary goes on Rent

The subject of the affordability of renting in Edinburgh
came up in a conversation I had with a Edinburgh landlord the other day and how
that would affect tenant demand. Everyone wants a roof over their head and,
since the Second World War, owning one’s home has been an aspiration of many
Brits. However, with rents at record highs, many are struggling to
save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of
paying the rent and bills and not saving, but even saving just a small amount
each month will sooner or later add up. George Osborne announced
such schemes as the Help to Buy ISA, where the Government will top up a
first time buyers deposit.

Therefore, I thought I would do some research into the Edinburgh property
market and share with you my findings. Edinburgh tenants spend on average
just over a third of their salary to have a roof over their
head. According to my latest monthly research, the average cost of
renting a home in Edinburgh is £1,014 per month. When the average
annual salary of a Edinburgh worker stands at £29,900 per year that means the
average Edinburgh tenant is paying 40.7% of their salary in rent.

You see one the reasons for rents being so high is
property prices being high. As I have mentioned before, there is a severe
lack of new properties being built in Edinburgh. It’s the classic demand
vs supply scenario, where demand has increased, but the number of houses being
built hasn’t increased at the same level. Also, Edinburgh people aren’t
moving home as often as they did in the 80’s and 90’s, meaning there are fewer
properties on the market to buy. If you recall, a few weeks ago I said since
Autumn 2007 the number of properties for sale in Edinburgh has declined year on
year.

So, the planners in Edinburgh haven’t allowed enough
properties to be built in the town and existing Edinburgh homeowners are not
moving home as much as they used to, thus creating a double hit on the number
of properties to buy. This is a long term thing and the continuing
diminishing supply of housing has been happening for a number of decades and
there simply aren’t enough properties in Edinburgh to match demand, these are
the reasons houses prices in Edinburgh have remained quite buoyant, even though
economically, over the last 5 years, it was one of the worst on record for Edinburgh and the
country as a whole.

However, things might not be all doom and gloom as
originally thought, as a recent Halifax Survey (their Generation Rent Survey)
suggested more and more people may be long term, if not lifelong, tenants.
In fact there is evidence in the report to suggest that the perception of how
difficult it is to get on the housing ladder is vastly different between
parents and people aged 20 to 45. It seems from this survey that the
state of the UK economy has shifted priorities quite significantly
in quite a short space of time. With fewer people able to save up
the deposit required by mortgage lenders, more and more people are continuing
to rent. This delay in moving up the property ladder has driven rents
across the UK up as more people were seeking rental properties.

It is often said that more people in central Europe rent
for longer or never own their own property. The last two census in 2001 and
2011 show that proportionally the percentage of people who own their own home
in Britain is slowly reducing and, as a country, we are becoming more and more
like Germany. That isn’t a bad thing as Germany is considered to
have a more successful economy, one of the main stays, often quoted, is because
they have a much more flexible and mobile workforce, (which renting certainly
gives) and from that, they have a higher personal income than in the UK.

Therefore, if we are turning into a more European model
and the youngsters of Edinburgh and the Country have changed their attitudes,
demand for rental properties will only and can only go from strength to
strength, good news for Edinburgh tenants as wages will start to rise and good
news for Edinburgh landlords, especially as property values in Edinburgh are
now 4.7% higher than year ago!

Whether you are a landlord, a ‘Homes Under the Hammer’
addict or just a homeowner who is interested in what is happening to the local
property market, then please visit The Edinburgh property Blog (www.theedinburghpropertyblog.co.uk),
contact me for a chat (phone us on 0131 603 4570) or
email me (news@thekeyplace.co.uk).

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About This Blog

This blog follows the buy to let market in Edinburgh. You'll find tips, guidance, and analysis that relates specifically to Edinburgh and you'll also find properties from all the estate agents in the city on here that may make decent investments.

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Robert Young

I operate The Key Place and if you're thinking of buying a property to let in Edinburgh, I'll be happy to advise or just offer a second opinion. I can be contacted on news@thekeyplace.co.uk, or 0131 603 4570.